WASHINGTON, February 2, 2011 – The World Bank Board of Directors yesterday approved a US$50 million loan for El Salvador to enable its national government to better confront natural disasters. The loan uses the modality of Deferred Drawn Option-- (DDO), a loan that allows the government to use the funds in case of a national disaster.
The Bank’s financing will bolster the Disaster Risk Management Program, a public investment plan that seeks to improve mitigation, risk prevention and disaster management.
El Salvador’s vulnerability to adverse natural events, exacerbated by environmental degradation and extreme climatic variability, threatens the nation’s development and long-term economic growth. Since 1972, natural disasters have claimed nearly 6,500 lives and caused more than US$16 billion in damages.
"These funds, which can be used immediately after a natural disaster, are of great importance to El Salvador because every time we have an emergency, public funds are stretched and in our current environment of restricted budgets this could be critical for our country," Alexander Segovia, Technical Secretary of the Presidency said.
Among its priorities, the 2010–2014 Development Plan targets funds for “efficient environmental risk management” and mandates the integration of disaster risk reduction with government investment programs.
In doing so, the Plan places disaster risk reduction at the forefront of the Government’s agenda. The Plan requires that investments in public infrastructure and housing be strategically selected based on environmental and risk reduction criteria. It will also promote preventive planning at the municipal level and take on the great challenge of developing land use plans for safer urban growth and resettlement of population without affecting the nation’s social and economic welfare.
The Government has also included climate change adaptation measures as a policy priority within the Plan. It recognizes that it must be better prepared for extreme natural phenomena, such as more frequent and intense floods and droughts—which will cause loss of life, crops, and livestock, and an increased spread of diseases.
More than 95 percent of El Salvador's population and gross domestic product are located in areas vulnerable to natural disaster, making its economy the second-most at risk in the world according to the Natural Disaster Hotspot study by the World. The same study also ranks El Salvador second among countries with the highest percentage of total population at a “relatively high mortality risk from multiple hazards.”
"This financial instrument will provide the country with the resources to focus on the emergency response in the aftermath of a disaster, rather than spend valuable time and efforts in fund-raising activities," said Felipe Jaramillo, WB Country Director for Central America. "This new operation is very much in line with our emphasis on disaster prevention as opposed to focusing only on disaster response," he added.
The Program supports the Millennium Development Goals and addresses disaster risk issues that affect the most vulnerable segments of the population in several ways. These include (a) improving the effectiveness and efficiency of disaster response mechanisms, (b) integrating principles of risk management and prevention across all government agencies, and (c) mainstreaming environmental protection and land use zoning regulations as critical components of risk management and prevention.
The US$50 million DDO from the International Bank for Reconstruction and Development (IBRD) is repayable in 29.5 years, including a 5-year grace period.